Weekly Corn Market Update 12/04/20
December 2021 (Dec21) corn futures (the benchmark for 2021 corn production) finished the week lower by 4.25-cents (~1.03%), settling at $4.1025/bushel. This week's price action took place in an 11.00-cent (~2.65%) range. The week's high of $4.1500/bushel is a new 52-week high. The week's low of $4.0400/bushel was 3.25-cents into the notable band we published last week.
Our corn demand index was down 0.32% this week. Fundamental discussions should still note increasing concerns over COVID-19, uncertainty surrounding future executive branch policy, and the Georgia Senate races. Any of those three factors continue to provide potential sources of volatility. These factors are especially concerning where they impact U.S. and Chinese trade relations.
Technically speaking, Dec21 corn futures remain in an uptrend that started from the August lows. That said, this week's weekly candles in the corn and beans could signify a reversal. The week's price action eased overbought conditions on the daily chart. However, various weekly momentum indicators remain in overbought territory. The contract high of $4.2500/bushel set on April 23rd, 2018, still looms over the market.
The options market for the 2021 crop year remains relatively illiquid. We continue to hold a few near-the-money short-dated March puts to protect our Quartzite Precision Marketing clients until the spring price begins setting in February. On Tuesday of this week, we added a small soybean hedge in the Nov21 1060-put. Implied volatility for options on the 2021 corn crop softened this week. We continue to see the most value in the June and August short-dated new crop options. However, liquidity concerns could still prevent establishing positions at favorable levels. We are adding a new chart this week comparing the at-the-money implied volatilities we are using in our model as of Friday's with those from last Friday.
Looking ahead to next week for Dec21 corn futures, we would consider movement within the $4.0350-$4.1750 per bushel range to be unremarkable. Notable moves would extend to the $3.9025-$4.3250 per bushel range. Price action beyond that would be extreme. We will return to publishing a chart of these levels versus price action after the new year. Be sure to visit our Twitter page to vote in the weekly poll we hold there each week. While you are there, please give us a follow.
Looking at the Spring and Fall prices for crop insurance this week, both distributions shifted slightly lower due to this week's rally. Like last week, the passage of time and reduced implied volatilities in the options markets have slightly narrowed both distributions. See the charts below for distribution and cumulative probability charts for both the Spring and Fall crop insurance prices.
As promised, we added two articles about option deltas to our Tools and Tactics section this week. The first, "Option Deltas - The Basics," briefly introduces option deltas. The second, "Option Deltas - A Crude Model," goes into more depth about the way option deltas move as model inputs change. The latter was a bit mindbending to write. We hope it is not that way to read - let us know how we are doing.
Thanks for taking the time to read. We look forward to your questions and feedback. Please feel free to contact us via our contact form, Facebook, Twitter, email, or phone at (970)294-1379. Thanks again. Have a great week.
Model Volatility
Spring Crop Insurance Price Charts
This week’s Spring Price Charts are update to reflect the changes mentioned in the 12/31/20 Weekly Corn Market Update.